The 4 Years Before You Retire

by Gary Foreman

Are you closing in on retirement? Do these things today so you can have a better retirement tomorrow!

It’s almost here! After decades of work, you’ll be retiring within the next 4 years. Congratulations! You’ve earned it!

But for many of us the truth is that we aren’t well prepared for retirement. Perhaps we haven’t saved enough. Or prepared essential legal paperwork. Maybe we haven’t done any planning at all. You have 4 options:

You can hire a fee only financial planner. They’re well educated and generally quite good. Most expect you to have $500,000 or more to invest and will charge 1.5% of your assets each year.
You can use a commissioned or salaried employee of a financial institution. Many are excellent. You’ll want to check them out to make sure that the advice you get is best for you even if it works to their disadvantage. This requires some knowledge on your part.
You can do it yourself. This will require you to take the time to learn some new skills and be responsible for the results. Most of the important concepts are not that difficult if properly explained.
You can do nothing hope for the best.

If you’ve chosen the 2nd or 3rd option here are some things to consider.

Choose Your Retirement Lifestyle

A major question for all retirees is how you will want to spend your time. Will you travel? Throw yourself into a hobby? Try something that you’ve never done before? The choices are endless. At least if you have the finances to support your wish list.

So now is the time to get serious about your plans. Including taking some steps to help you get to the retirement you desire and deserve.

Learn All You Can

Retirement will mean major changes in your life. Especially in your finances. Fortunately you don’t need to be a Harvard economist to learn enough to make good financial decisions for your retirement.

There are many sources of information for people nearing retirement. Many are written for the moneyed crowd. And their advice doesn’t really help you. But some are designed for the average person who’s worked hard and needs to make the most of the money they have. Seek them out and apply the good advice you find.

Save As Much As You Can

Most of us haven’t saved nearly enough for retirement. But that doesn’t mean that we should quit. We can still improve our situation now. It might mean learning some new shopping skills or creating new habits. (One way to keep your brain sharp is to continually learn new things.)

Many of us will not get a pension and haven’t saved as much as we’d like over the years. We’re hoping that Social Security can take up the slack. The sad truth is that on average, Social Security will replace less than half of your current income! So you may have to make some decisions about when to retire, whether you’ll continue to work part-time or whether you can cut enough expenses to survive on the available income. Now is the time to find out how secure your retirement is. While you still can make some meaningful changes.

Don’t Let What You Save Slip Through Your Fingers!

The very wealthy can afford to make some financial mistakes. You don’t have that luxury. You need to make sure that your savings and investments earn as much as they can without undue risk. Selecting the right bank or mutual fund could make a big difference in how comfortable your retirement is.

Get Out of Debt Before You Retire

If you’ve been in debt (mortgage, car loans, student loans, credit cards, etc.) for most of your adult life, it’s hard to even think about being debt free. And maybe it’s not possible to pay off all your debts before you retire.

But it’s important to reduce the amount you owe as much as possible while you’re still collecting a paycheck.

If you think it’s hard making payments now, it’ll be that much harder when you’re living on retirement income. That’s why you want to do what you can now to lower your payments after you retire.

It may be tempting to just continue on your current path. But remember that your income will be less once you retire. And money that goes to repaying debts is money that can’t pay for groceries or trips to see the grands.

Protect Your Credit Score

You might think it’s unnecessary. But retirees are a major target for identity thieves. They’re more likely to have savings and credit than younger people. It’s easy to get their information (if your doctor has your Social Security number and birth date, that’s all a thief needs).

As you enter retirement you’ll be making lots of financial decisions. More than you have in years. And the deals you get will be affected by your credit score.

You may have earned a good credit score. But did you know that 1 in 4 have a significant error in their report? Big enough to affect their credit score? The only way to find out is to check your score often. Make it a regular habit.

Have All Necessary Legal Documents

You’ll want to make sure that you have appropriate wills, powers of attorney and health care directives. If you don’t you could cause major problems if you’re incapacitated or for your loved ones after you die. You may want a professional to write the documents, but even then you’ll need to make the important decisions.

Don’t Overlook Anything

This is a new experience for you. For years you’ve been working and raising a family. This is probably the biggest lifestyle change since you became an adult. There will be many choices available to you. Decisions you’ll make. You could sit back and just hope for the best. But chances are that won’t get you the retirement you desire or deserve.

So what will you do today for that great retirement?

About the Author

Gary Foreman is the former owner and editor of The Dollar Stretcher. He's the author of How to Conquer Debt No Matter How Much You Have and has been featured in MSN Money, Yahoo Finance, Fox Business, The Nightly Business Report, US News Money, Credit.com and CreditCards.com.